HSA and Medicare receipts

[joesxm3]

I see that I can reimburse Medicare B and D premiums, but not Medigap premiums.

If reimbursed, can these premiums or other expenses still be deducted as medical expenses subject to itemized deduction rules?

What is the best way to save receipts for Medicare premiums if I have them automatically paid from my checking account? Are the bank statements enough?

 

[audreyh1]

For HSA Medicare Premium payments record keeping we save a copy of the Medicare payment history covering the past year from Medicare.gov .

 

[jimbee]

AFAIK, you can't deduct medical expenses that were paid using an HSA. That would be equivalent to deducting the expenses twice.

 

[G-Man]

The companies my wife and I work for offers HRA (Health Reimbursement Account) starting at age 65 that can be used for Medigap premiums. I'm hoping it is still available when we reach 65.

 

[SecondCor521]

I see that I can reimburse Medicare B and D premiums, but not Medigap premiums.

Correct. There also other things that you can additional reimburse tax-free from an HSA (OTC stuff, dental, vision, medical copays, etc.) of course.

If reimbursed, can these premiums or other expenses still be deducted as medical expenses subject to itemized deduction rules?

No:

"Caution: You can’t deduct qualified medical expenses as an itemized deduction on Schedule A (Form 1040) that are equal to the tax-free distribution from your HSA."

-- page 9 of IRS Pub 969 https://www.irs.gov/pub/irs-pdf/p969.pdf

If you have enough medical expenses and wanted to, you could take the itemized deduction for some of your medical expenses, and take an HSA distribution for other of your medical expenses. So if you had $30K in medical expenses, you could take a Schedule A itemized deduction for ($15K - 7.5% of AGI) and a qualified HSA distribution for $15K.

But you can't double dip as another poster said.

 

[teej1985]

Medigap premiums aren't deductible for the same reason that they can't be reimbursed by HSA. Congress made it that way.

 

[Trooper]

This may be a dumb question, but why would one want to reimburse one's self for qualified Medicare expenses from an HSA? Isn't that equivalent to moving tax free money into a taxable account, in which any growth/income would be taxable?

 

[SecondCor521]

This may be a dumb question, but why would one want to reimburse one's self for qualified Medicare expenses from an HSA? Isn't that equivalent to moving tax free money into a taxable account, in which any growth/income would be taxable?

There are a few reasons why a person might want to do so:

1. They want to pay for their expenses without creating additional taxable income in that year.

2. They want to reduce the balance in their HSA in order to:

a. Eliminate their HSA and have one fewer account to deal with, and/or

b. Avoid or reduce the impact of the not-particularly-beneficial tax treatment of HSAs upon their death.

As for your second question, although money is fungible, a distribution from an HSA wouldn't be really growing after disbursement because it is going to pay (via reimbursement) a medical expense. If a person who made an HSA distribution also invests into a taxable account, then it's conceptually more like the money that they got from some other source (to originally pay the medical expenses) was put into the taxable account and the HSA money went for the medical expenses. In some cases, the money to pay the medical expenses in the first place may have come from the taxable account, so it's just putting money back in the same place.

 

[pb4uski]

This may be a dumb question, but why would one want to reimburse one's self for qualified Medicare expenses from an HSA? Isn't that equivalent to moving tax free money into a taxable account, in which any growth/income would be taxable?

Well, there's really no growth because the money has gone out the door for the qualified medical expenses. I do withdrawals regularly since we went on Medicare because I want to drain these accounts over time. HSAs don't inherit well at all... they are taxable income to the beneficiary AND there are questions whether your heirs can even withdraw for your past medical expenses tax free. Also, even if that part was clear I didn't want DW and DD to have to remember to do the withdrawal.

So I did a big withdrawal for 2010-2019 qualified medical expenses and now each February I do a withdrawal for the prior year's qualified medical expenses... principally Medicare Part B and Part D premiums, deductibles, vision, dental, etc. At that rate our HSAs will be gone in about 5-6 years and we'll have two less financial accounts to deal with.

 

[Aerides]

This may be a dumb question, but why would one want to reimburse one's self for qualified Medicare expenses from an HSA? Isn't that equivalent to moving tax free money into a taxable account, in which any growth/income would be taxable?

I have been draining my employer-HSA the past couple of years. It's non-transferable so I can't move it to Fido or whatever. And they have a small monthly fee now that I'm no longer contributing (which I can't, because no longer employed, catch-22). Oh and when I put in my final reimbursement request this week I had to subtract $25 for an Account Closure Fee...

my word, the words that came out of my mouth....

But mainly I had enough expenses of late, and I don't want to save receipts (even digital) for years on end. I'm the one that would get audited and then realize they lost that file...

 

[audreyh1]

Pretty much same with planned drain of our HSAs before we get too old. We still have plenty growing tax-deferred untouched for a long while.

 

[Phroig]

This may be a dumb question, but why would one want to reimburse one's self for qualified Medicare expenses from an HSA? Isn't that equivalent to moving tax free money into a taxable account, in which any growth/income would be taxable?

Income will be taxable, but can be minimized by choosing appropriate investments. Growth need not be taxable, since your heirs get stepped-up basis.

 

[Rianne]

We're saving our HSA savings for dental issues. I have too many crowns that are very old. One is from when I was 12 and fell off my bike! It's hanging there. Dentists can tell how old your crowns are by the material used. And my front tooth has a tiny fracture. You can't see it.

 

[Trooper]

Thanks everyone for the great responses. I'm gonna start draining it down as well.

Two more questions: 1) Do those of you who use your HSA for Medicare parts B & D have those payments come directly from your HSA, or reimburse later? 2) Is the IRMAA portion of B & D a qualified HSA expense?

 

[pb4uski]

I reimburse later.

Haven't researched it but I would think whatever you actually paid for Part B and Part D would qualify irrespective of what IRMAA tier it is.

 

[SecondCor521]

Thanks everyone for the great responses. I'm gonna start draining it down as well.

Two more questions: 1) Do those of you who use your HSA for Medicare parts B & D have those payments come directly from your HSA, or reimburse later? 2) Is the IRMAA portion of B & D a qualified HSA expense?

1. For people on SS, their Medicare B and D are deducted from their SS payment. So people in that situation with HSAs would be forced to reimburse.

Also, it seems to me that HSAs are sort of like savings or brokerage accounts; they're not really set up to do monthly bill pays. So even for those on Medicare but not SS, they probably also go the reimbursement amount.

2. Yes. IRMAA is a Medicare B and D surcharge, so it counts. For those on SS subject to IRMAA, when they get their 1099-SSAs, it doesn't even split IRMAA out. It just says, "Hey, you paid $X for Medicare B and $Y for Medicare D." The only way to know it's IRMAA is to see that the number on the 1099-SSA is larger than normal. (Well that and from the SS benefits letter each year that says what your IRMAA is going to be, of course.)

 

[mpeirce]

Also, it seems to me that HSAs are sort of like savings or brokerage accounts; they're not really set up to do monthly bill pays.

I’m not I’d agree. Our HSA has a debt card and we use to pay our dentist and pharmacist, for example.

Easy peasy…

 

[Trooper]

1. For people on SS, their Medicare B and D are deducted from their SS payment. So people in that situation with HSAs would be forced to reimburse.

Also, it seems to me that HSAs are sort of like savings or brokerage accounts; they're not really set up to do monthly bill pays. So even for those on Medicare but not SS, they probably also go the reimbursement amount.

2. Yes. IRMAA is a Medicare B and D surcharge, so it counts. For those on SS subject to IRMAA, when they get their 1099-SSAs, it doesn't even split IRMAA out. It just says, "Hey, you paid $X for Medicare B and $Y for Medicare D." The only way to know it's IRMAA is to see that the number on the 1099-SSA is larger than normal. (Well that and from the SS benefits letter each year that says what your IRMAA is going to be, of course.)

Thanks so much. Yeah, I'm not taking SS yet so I typically forget about that scenario. And I agree our HSA is through a brokerage (Fidelity) and although I have a debit card, not sure if they're setup for periodic bill-pays.

 

[audreyh1]

Thanks everyone for the great responses. I'm gonna start draining it down as well.

Two more questions: 1) Do those of you who use your HSA for Medicare parts B & D have those payments come directly from your HSA, or reimburse later? 2) Is the IRMAA portion of B & D a qualified HSA expense?

We are paying directly from the HSA. It is convenient to us to do it that way as the Fidelity HSA has a good bill pay system.* Once SS starts paying for those premiums we will switch to reimbursement. Whatever you pay for Part B and D premiums is qualified.

Also, it seems to me that HSAs are sort of like savings or brokerage accounts; they're not really set up to do monthly bill pays. So even for those on Medicare but not SS, they probably also go the reimbursement amount.

And I agree our HSA is through a brokerage (Fidelity) and although I have a debit card, not sure if they're setup for periodic bill-pays.

*Yes, the Fidelity HSA is now set up for periodic bill pays. DH schedules a whole year once he gets his November letter telling him the amounts for the coming year. We make sure the core account covers it.

 

[Trooper]

*Yes, the Fidelity HSA is now set up for periodic bill pays. DH schedules a whole year once he gets his November letter telling him the amounts for the coming year. We make sure the core account covers it.

Thanks Audrey. Currently my B & D premiums are coming out of our checking account. Could I just switch it to Fidelity's HSA debit card number instead, at medicare.gov?

 

[audreyh1]

Thanks Audrey. Currently my B & D premiums are coming out of our checking account. Could I just switch it to Fidelity's HSA debit card number instead, at medicare.gov?

Up to you.

We bill pay by check from the HSA account so is initiated from Fidelity. Medicare.gov has instructions on how to use bank bill pay. Fidelity switched to electronic check payments to CMS Medicare a couple of years ago so our payments are received promptly.

I don’t know how to schedule payments using the debit card. That card number is also not the same as your Fidelity HSA account number.

Maybe you are using Easy Pay? We don’t use that.

 

[Trooper]

Up to you.

We bill pay by check from the HSA account so is initiated from Fidelity. Medicare.gov has instructions on how to use bank bill pay. Fidelity switched to electronic check payments to CMS Medicare a couple of years ago so our payments are received promptly.

I don’t know how to schedule payments using the debit card. That card number is also not the same as your Fidelity HSA account number.

Maybe you are using Easy Pay? We don’t use that.

Thanks again Audrey. Currently I am paying CMS/Medicare from our credit union's checking account. This is a "pull" process -- I provided Medicare our checking account info and they withdraw $ quarterly.

I'll look into how to do this with Fidelity; I'm ambivalent as to whether its a push from Fidelity or a pull from CMS/Medicare...unless I shouldn't be

So to summarize the expenses, where they go, and whether they are qualified HSA expenses:

Part B Premium - CMS/Medicare - qualified HSA
Part B IRMAA - CMS/Medicare - qualified HSA
Part B Supplemental - AARP/UHC - not qualified HSA
Part D Premium - AARP/UHC - qualified HSA
Part D IRMAA - CMS/Medicare - qualified HSA
All other copays, deductibles, dental, vision, etc. are qualified HSA expenses.

Do I have this right? I realize not everyone has AARP/UHC for the supplemental and drug plans.

 

[audreyh1]

In the HSA I prefer to push because I need graceful handling of the transition to SS paying the premiums and I don’t want a situation where Medicare attempts to refund a payment which I understands sometimes happens with Easy Pay transitioning to SS check deductions. Also, what if the HSA account ran low and I had to switch to another account, the timing could be awkward. I just have a lot more control pushing, and can avoid some awkward situations. I don’t know how HSA refunds are handled, maybe it’s no big deal but I would hate for the IRS HSA distribution form to get screwed up.

FWIW I’m paying monthly because we are subject to IRMAA.

 

[xlf11]

Thanks again Audrey. Currently I am paying CMS/Medicare from our credit union's checking account. This is a "pull" process -- I provided Medicare our checking account info and they withdraw $ quarterly.

I'll look into how to do this with Fidelity; I'm ambivalent as to whether its a push from Fidelity or a pull from CMS/Medicare...unless I shouldn't be

So to summarize the expenses, where they go, and whether they are qualified HSA expenses:

Part B Premium - CMS/Medicare - qualified HSA
Part B IRMAA - CMS/Medicare - qualified HSA
Part B Supplemental - AARP/UHC - not qualified HSA
Part D Premium - AARP/UHC - qualified HSA
Part D IRMAA - CMS/Medicare - qualified HSA
All other copays, deductibles, dental, vision, etc. are qualified HSA expenses.

Do I have this right? I realize not everyone has AARP/UHC for the supplemental and drug plans.

Before taking SSB, I paid Part B with CC in every 3m on the Medicare website instead of checking, which is free and easy to do and get CC bonus as well. Plus you get both bills and payment history for future HSA reimbursement. Just found out Medicare website only keeps the current 15m payment history and you can get Medicare payment history via SSA once on SSB.

 

[Trooper]

Another question regarding this: Since Medicare premiums paid out of an HSA are not deductible on Schedule A, does that mean that those that do pay them out of an HSA do not itemize?